Dreaming of 2001

Read to the end for a post about talking heads.

I've been a lifelong Sega fan. From the day my parents brought home a Genesis, I was hooked. My teenage years were spent rushing Sonic through Emerald Hills zone, blasting monsters in the sewers, and virtually fighting. There's been leaks of news lately that Microsoft may stop making the Xbox console and let me tell you, it's giving me large Sega Dreamcast flashbacks. Why? Let's get into it.

The Dreamcast was Sega's final console. Released on 9/9/99, it was the company's last attempt to recover from the debacle of everything that came after the Genesis.

Through incredible mismanagement and what amounted to a rivalry between the US and Japan arms of Sega, everything after the Genesis was a dud. Sega CD: had few compelling games. 32X: a weird add-on that never enhanced the Genesis in a meaningful way. Saturn: launched so prematurely, retail stores had no inventory and developers wanting Day-1 games available were months away from finished versions.

But Dreamcast was different. It was developed to have equivalent hardware to what was in arcades at the time. It had a modem (in 1999!) to enable online gaming; something that is so essential today it's impossible to not have this in a modern console. The games looked great, played great, and were tons of fun.

And then Sony released the PS2 about 18-months later.

The Dreamcast went into a tailspin because the PS2 was a cheap way to get a DVD play into the home and Dreamcast games were so easily copied, Sega was losing money on the console AND not selling the software to make up for it. And then in 2001 it was over. Sega went into the business of only making games. That continues to this day, proving they've always been good at that.

Microsoft is echoing a lot of what were the final months of the Dreamcast before Sega killed it. Xbox games have been coming out on the rival PS5 and more are planned. Microsoft spent $68 billion on Activision, which finally went through. Sales of its Series X console were dismal and the company is simply not selling enough hardware these days.

While it's not a 1-to-1 copy of what happened to Sega, Microsoft seems to be walking a similar path. An ominous post by Phil Spencer, head of Xbox spoke of an announcement soon about the "future of Xbox". To me, that tracks with everything else: making games is more profitable than making hardware. What will this announcement be? Nobody truly knows, but it is very possible Microsoft has decided to cede its market to Sony and Nintendo.

Microsoft only got into the console business in order to protect the PC Gaming / Windows business. It was a way to keep players 'in the fold' in order to make sure they kept spending money on Microsoft offerings. Today, especially with antitrust and the intense scrutiny of the Activision purchase, it's possible the work to keep making actual Xboxes simply isn't worth it anymore.

Sega learned the hard way that you can make amazing games and still have a console that can't compete. They made the decision to discontinue the Dreamcast (which I still love and have) in order to live on as a game developer. Microsoft may be looking to that story to dictate its future. We'll learn what that is on the 15th.

Thanks for reading. Now, onto the rest of today's issue.

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